BoE: Serious scepticism about rate hike - BBH
|Despite sterling's appreciation, investors harbor serious skepticism of talk that the Bank of England could raise rates at its August 3 meeting, notes the analysis team at BBH.
Key Quotes
“Interpolating from the OIS, the market sees about a one-in-eight chance. The notable thing is that it was less than one percent a month ago. This week's economic data will offer more evidence for the majority at the MPC that there is no rush to raise interest rates.”
“Many expect UK CPI to have stabilized in June at 2.7%. The risk is asymmetrical. A strong report would not necessarily persuade the MPC, while a weaker report could prompt investors to push down market rates and push sterling lower. The year-over-year pace has not slowed since last year's referendum in any month but was flat twice. Many expect the spur from the past sharp depreciation of sterling and the oil prices will fall out of the year-over-year comparisons soon.”
“A couple of days later on July 20, the UK reports retail sales. Some recovery after the sharp 1.6% contraction (excluding auto fuel) in May is expected, but the flatter the bounce, the more sentiment will focus on the squeeze on wages from subdued increases in nominal pay and the still high inflation. Sterling and UK interest rates may be sensitive to any disappointment.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.